Canada Revenue Agency Short Term Computer Troubles With Personal On-Line Tax Services

The Canada Revenue Agency has had a very difficult March 2007 when they suddenly had to deal with some unplanned and untimely computer problems. CRA announced on March 6, that it had suspended operation of many of its on-line tax services related to personal tax filings, including Efile, Netfile and My Account. They were able to successfully reinstate electronic filings on March 14, the first day of operations following a nine-day system outage.

The services were suspended owing to infrastructure problems with the CRA’s computer systems. The CRA has issued a fact sheet detailing the services affected by the suspension, and that fact sheet is available on the Agency’s website. [See link below]

At this stage, the CRA is confident that any outstanding issues for individuals that may have resulted from the system outage are being addressed. However, taxpayers can contact the CRA to resolve issues related to the outage or other service concerns.

Here are a few of the Frequently Asked Questions: (the full list is available at CRA web site [See link below]

Q.1 Are the CRA's processing systems working?
A.1 Yes, the CRA's processing systems are back online, including NETFILE, EFILE, TELEFILE and My Account. Our databases have been restored, our online services have been tested to our satisfaction, and our employees are starting to process the backlog of returns and payments.

Q.2 Is my tax and personal information at risk?
A.2 No. There was never a time when the security and privacy of taxpayer data was at risk. A malfunctioning software patch, not any kind of intrusion into our systems, was the cause of this service interruption.

Q.3 Will the tax deadline be delayed?
A.3 No. There are 78 days between the time electronic services become operational and the filing deadline of April 30. The service disruption lasted nine days. Therefore, as of the date services were restored, more than 40 days remained in order for taxpayers to honour their tax obligations

Security:
Q.1 Has the privacy and security of the taxpayer's information been compromised?
A.1 No, the privacy and security of taxpayer information has not been compromised. This service interruption was caused by the installation of a malfunctioning software patch, not any kind of intrusion into our systems.

Q.2 How can the CRA be sure that the electronic services are now safe and that recent technical problems will not occur again?
A.2 CRA technical specialists removed the vendor patch that caused the problem. A problem caused by a vendor patch is very rare based on our research and experience. The infrastructure and databases have been recovered and we have verified their contents. Additional monitoring has been put in place.

Q.3 What systems/processes does the Agency have in place to ensure the security and confidentiality of taxpayer information when electronic systems fail?
A.3 To protect the confidentiality of client information, the CRA has layers of security hardware, software, and processes in place based on Industry and Government recommended best practices.

Q.4 Was this problem caused by illegal activity, hacking, or a virus?
A.4 No, this problem had nothing to do with such types of activities. It was caused by the installation of a bad software patch.

Q.5 Do NETFILE, EFILE, and TELEFILE have security features built in to them, so that in the event of system failure, information is protected?
A.5 Yes, in the event of a system failure, taxpayer data is not accessible to outside persons/systems. Internally, there are safeguards in place to ensure that there is no unauthorized access to data.

Q.6 Has the Agency experienced any problems of a similar nature before with these systems?
A.6 No, although like any enterprise our size, we have experienced outages to I.T.systems in the past, this outage is unique in nature.

The Honourable Jim Flaherty, Minister of Finance, released guidelines on the Children's Fitness Tax Credit, which became effective on January 1, 2007.

The Minister confirmed that as recommended by the Expert Panel for the Children’s Fitness Tax Credit, the definition of eligible programs will support children’s participation in all programs that significantly contribute to their fitness. In addition, the Minister indicated that substantial additional support would be provided to children eligible for the disability tax credit to recognize the unique barriers they face in becoming more active.

"Studies show that regular physical activity has many positive effects on children, including balanced growth and development and improved physical fitness," said Minister Flaherty. "This measure will help parents offset some of the costs associated with these activities and start children down the road to a lifetime of healthy, active living."

Minister Flaherty noted that he would soon introduce regulatory changes that would define an eligible program for the purposes of the credit and amendments to the Income Tax Act to implement the proposed enhancements for children with disabilities (see the attached backgrounder for more information).

"We know that families have limited budgets, and the Children’s Fitness Tax Credit will help make it possible for more young Canadians to get involved in sport and physical activity," said the Honourable Peter Van Loan, President of the Queen’s Privy Council for Canada, Minister of Intergovernmental Affairs, and Minister for Sport. "I am pleased that we are delivering on this important commitment for families and taxpayers."

Here are a few key highlights from the Federal and Provincial budgets that were announced recently. These changes will be effective for the 2007 tax year.

FEDERAL:

-The government will introduce a $2,000 child tax credit to provide up to $310 per child of tax relief depending on family income.

-Tax credits for low-income spouses and dependents of single individuals will rise to $8,929 from $7,581. The government estimates the move will provide up to $209 of tax relief for a supporting spouse or single taxpayer who is supporting a child or relative.

-Meal expenses that long-haul truck drivers can deduct for tax purposes increase from 50 to 80 per cent.

-The lifetime capital gains exemption for farmers, fishermen and small business owners will rise to $750,000 from $500,000.

-Manufacturing and processing businesses will be allowed to write off their capital investments in machinery and equipment acquired on or after March 19, 2007, and before 2009 using a special two-year, 50-per-cent straight-line rate.

-The capital cost allowance rate will rise to 10 per cent from four for buildings used in manufacturing and processing, and to 55 per cent from 45 for computers.

-The age credit amount will be increased by $1,000 to $5,066 for anyone over 65.

-Pension income splitting will be introduced.

-The age limit for converting a registered retirement savings plan (RRSP) will increase to 71 from 69 for those Canadians who wish to continue working longer.

-A new Registered Disability Savings Plan will be established to help parents and others save toward the long-term financial security of people with severe disabilities.

-As promised, the government will introduce a Working Income Tax Benefit of up to $500 for individuals and $1,000 for families on welfare to provide incentives to work.

-The $4,000 limit on contributions to annual registered education savings plans (RESPs) will be eliminated and the lifetime contribution limit will rise to $50,000 from $42,000.

-A performance-based rebate program will offer up to $2,000 for the purchase of a new fuel-efficient or efficient alternative-fuel vehicle.

-A new green levy on "gas guzzlers," will replace the excise tax on heavy vehicles. It will be based on fuel efficiency ratings, and will be paid by the manufacturer on vehicles delivered after March 19. The levy starts at $1,000.

For a full copy, [see link below]

PROVINCIAL:

-The new Ontario Child Benefit (OCB) will provide an additional $2.1 billion in benefits cumulatively over the first five years to low-income families. The OCB begins in July with a payment per child of up to $250. By 2011, low-income families would receive up to $1,100 per child every year.

-New provincial housing allowance would provide up to $100 per month, for a maximum of five years, to eligible families. This five-year, $185 million program would begin in January 2008.

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-We would like to congratulate Andre on successfully passing his CGA exam in December. All of his hard work and studying has paid off and but now the fun begins as Steve “tortures” him through his first tax season with H&K!

-Pat was able to get down to California at the end of February to visit with her daughter, Naomi, who is starting up a business there. She had a great time and is trying to talk Steve into opening a branch office down there!

-Snejana is once again becoming a “young” grandmother as one of her step-sons advised her that he and his wife are expecting soon. Not sure if Snejana will be asking to spend more time at work to avoid babysitting duties or asking for time off to enjoy the young one – more likely the latter.

-Steve snuck away for March break with the family for the first time since becoming an accountant. Skiing in the Eastern Townships of Quebec was great and even little Gavin (3) managed to go top to bottom by the end of the week (without Dad holding onto his “leash”). Check out the photos on the website.

-Bruno was able to get in a little R&R in February down in Florida but is now right back into the tax season frenzy as we all look forward to May!

Hartrell & Kirkham Chartered Accountants
Hartrell & Kirkham© 2007

The firm does not warrant or guarantee the accuracy of any statement or other information and materials provided in this newsletter. All articles and other information and materials in this newsletter are provided for general information purposes only and are not intended to constitute legal, accounting or tax advice or opinions on any specific matters.

email: steve@hartrellkirkham.ca

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